Demand. Booking pace. Transactions. While improvement in each suggests recovery is on its way in the global hotel industry, the good news isn’t limited to just these three. While being interviewed for this report, hoteliers also pointed to these four other bellwethers of growth:
Revenue per available room and demand certainly go hand in hand, but a number of sources interviewed for this report singled out the former as a definitive sign of recovery.
“An increase in RevPAR remains the ultimate metric,” said Ken Greene, president of the Asia/Pacific region for Wyndham Hotel Group.
Hotel RevPAR performance (April 2010, year over year; US$)
Source: STR and STR Global
“You’ve got improving RevPAR, particularly in many markets where hotel owners have had to cut and control costs in view of declining RevPAR,” said Arthur de Haast, global CEO of Jones Lang LaSalle Hotels. “That means there’s going to be pretty strong flow through of revenue to the bottom line.”
Arthur de Haast
Jones Lang LaSalle Hotel
In its first-quarter earnings release, InterContinental Hotels Group reported positive RevPAR growth for the first time in 18 months—up 0.2 percent for the first quarter and up 4.1 percent during March.
“This is encouraging and continues to give us reason to believe our prospects remain very good,” the company said.
The prospects have been good for Best Western International since February, when the company began experience steady increased in demand and RevPAR, said David Kong, the membership company’s president and CEO.
2. Consumer confidence
A consumer without confidence is like a car without wheels. Neither is going anywhere.
During times of economic uncertainty, it’s not surprising that consumers hunker down and saving rates skyrocket. But for the industry to get back on its feet, it needs travelers to spend those hard-earned bucks on the open road.
Fortunately for U.S. hoteliers, the Consumer Confidence Index has posted three consecutive monthly gains in the U.S. Its latest reading in May stood at 63.3, up from 57.7 in April. (The index was set to 100 in 1985.)
chairman and CEO
Interstate Hotels & Resorts
“When the recession really began … people seemed to stop traveling because they were afraid of the future,” said Steve Rudnitsky, president and CEO of Dolce Hotels and Resorts. “What we’re seeing now is people starting to come back, and consumer confidence is starting to come back , and as a result, so is demand.”
Real gross domestic product, or GDP, has long been a barometer of overall economic health, but it’s just as applicable to the hotel industry, said Tom Hewitt, chairman and CEO of Interstate Hotels & Resorts.
“Our industry really follows or is tied to GDP performance,” he said. “You may be aware that the latest forecast coming out is that GDP for the quarter is slated to be just a hair above 3 percent. … That bodes well for our industry.”
First-quarter U.S. GDP did increase 3.0 percent compared with the previous quarter, according to the U.S. Bureau of Economic Analysts. During the fourth quarter of 2009, GDP increased by 5.6 percent.
Who says the best bellwethers have to be statistical in nature? Just as much can be gleaned from intangibles, such as one-on-one conversations or the emotional temperature of industry conferences.
In both cases, the hoteliers can expect good things in the months ahead.
“Everything consistently is suggesting that things are clearly getting better and that improvement is likely to be sustained going forward,” said Mark Woodworth, president of PKF Hospitality Research. “Anecdotally, just talking to people around the country … they’re all pretty much saying the same thing: The inquiries are up. Advanced bookings are up. They’re not having to discount as much.”
PKF Hospitality Research
Greene has experienced similar encounters.
“The overall mood of those in the industry, including developers, owners, management companies and hotel employees, is becoming increasingly positive,” he said.
“Each signal plays into the other,” he added. “Increased demand is what drives occupancy, and in turn, increased occupancy helps create a positive sentiment throughout the industry.”